Report: Patent Trolls Cost Economy $29 Billion In 2011, Often Target The Little Guy

Brad Chacos

Don't feed the trolls; the axiom may work well for avoiding Godwin's Law in forum postings, but it isn't working so well in courtrooms around the globe. In fact, a new study from the Boston University School of Law says patent trolls -- companies that deal solely in IP litigation rather than actual services and products -- are fatter and hungrier than ever before, costing the economy a whopping $29 billion in 2011. To put things in perspective, trolling "only" cost the economy roughly $6.7 billion in 2005.

James Bessen and Michael J. Meurer examined data from 82 companies that defended themselves against a total of 1,184 claims against patent trolls. That's a hefty sampling, but nowhere near the total number of claims, which goes to show how prevalent patent trolling has become: overall, 2,150 companies defended against a whopping 5,842 claims from patent trolls last year.

Patent trolls often say that knowledge is just another commodity, or that they bring ideas from small inventors to the big time or foster innovation in other ways; the BU report says otherwise.

The authors found that most trolling victims were small- or mid-sized companies with an average revenue of around $10 million, not major multi-national corporations. And with the legal costs to defend a patent claim averaging out around half a million bucks and an average settlement of $1.33 million, protecting against trolls can leave a small company very bankrupt, very quickly -- leaving them without a budget to invest in the innovation that trolls claim to spur on.

"Publicly-traded (patent trolls) cost small and medium-sized firms more money than (the trolls) could possibly transfer to inventors," the authors say.

A study by Catherine Tucker is cited by the authors and posits that patent trolls can actually stifle innovation in other ways, too; after a handful of medical imaging companies were sued by a troll, the sued companies stopped innovating as aggressively with their software products, presumably to avoid further litigation and resulting in a one-third loss of sales.

So there you have it! Patent trolling sucks, and now you have the numbers to prove it.

Via PC World ; image via WMPowerUser

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